Why has the 500 Index rallied over 19% in the last 120 days? Was the rally a normal occurrence, due to the circumstances at hand 120 days ago? 

Yes the size of the gains was typical and I suspect it had a ton to do with the look on the guys face below!

The chart below was created for Premium Members on 10/6, reflecting that the “Crowded Trade” had become cash 120 days ago…  Fear levels were reaching levels seldom seen in the past 15-Years! Cash levels at the Rydex Fund family reported by Sentiment Trader were hitting record levels as the 500 index was on channel and Fibonacci support, while the VIX was at resistance (see post here)


As I shared in the original post…even if things seem dark around the world, these conditions do not lend themselves to shorting!  Below is another great chart produced by Sentiment Trader, reflecting what forward performance has usually been for the 500 Index, once the Rydex ratio hits 150%.


4 months have passed since the Rydex ratio hit the 150% level…Has the 500 Index performance been fairly typical after the crowded trade became cash in early October?  The above chart would suggest it has!  This time around the 500 index gained 13.7% in 90 days and 19.6% in 120 days.  The above chart reflects that the average gain 90 days later was just under 19%.

Curious where the Rydex ratios stands 120 days later See Below for an update to the top chart in this post…



The rally over the past 90/120 days falls in line with prior times the Rydex ratio hit its 150% level.  What was the dark news in the past when the Rydex ratio hit 150%? 1998-Russian Debt concerns….2002/03-9/11 fallout, recession… 2009 Financial Crisis…2011 European concerns. 

 European Debt was downgraded by Standard and Poors on 1/17 and the Greek ETF (GREK) rallied over 40% in the following 2 weeks. (see post here) 

I hope the above charts reflect that sentiment extremes can be helpful in our attempt to enlarge our portfolios, especially when certain patterns come into play!


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